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Senate Democrats unveil jobs package with tax breaks to entice GOP

Draft measure ignores some of Obama’s ideas

Senator Chuck Schumer hopes to exempt companies from Social Security payroll taxes on hires who were unemployed. Senator Chuck Schumer hopes to exempt companies from Social Security payroll taxes on hires who were unemployed.
By Andrew Taylor and Stephen Ohlemacher
Associated Press / February 10, 2010

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WASHINGTON - Senate Democrats sought to round up Republican support yesterday for a limited jobs bill, hoping to hand President Obama a badly needed political victory before Congress breaks for Presidents’ Day next week.

Some Republicans are willing partners because much of the bill is made up of tax breaks they support, though many said they were waiting to see the details.

The 362-page measure is still in draft form and has not been officially released.

The draft has very few new ideas for creating jobs, other than a $10 billion plan to exempt companies from paying their share of Social Security payroll taxes for new hires who had been unemployed for at least 60 days this year.

The idea, by Senator Chuck Schumer, Democrat of New York, and Senator Orrin G. Hatch, Republican of Utah, is regarded as more workable than Obama’s plan for tax credits of up to $5,000 for new hires because it is simpler and gets the tax breaks to businesses faster.

The rest of the measure contains mostly last year’s unfinished business, including renewal of business tax breaks that have expired, an extension of unemployment benefits and health insurance subsidies, and a delay in a cut in Medicare payments for doctors.

The jobs bill is politically important for Democrats seeking to respond to public anxiety about the economy. But the measure also has a lot of pull, with an assortment of lobbying groups seeking to extend these tax breaks and other benefits that are expiring.

The measure ignores some of Obama’s ideas, including the per-job tax credit, a $250 payment to Social Security recipients, and $25 billion to help cash-strapped states.

Instead, the cornerstone of the plan would be the Social Security payroll tax exemption. A recent Congressional Budget Office report estimates that the idea could create up to 18 jobs per $1 million in tax relief, a more efficient way to boost hiring than provisions in last year’s $862 billion economic stimulus bill.

The $10 billion plan could create perhaps 50,000 to 90,000 jobs through September and another 80,000 to 180,000 jobs next year, the report said.

The overall measure would cost roughly $80 billion, said Mitch McConnell, the Senate minority leader and a Republican of Kentucky.

Many elements would be financed by a variety of provisions closing tax loopholes such as one enjoyed by paper companies that get a credit from burning a dirty pulp-making byproduct known “black liquor’’ as though it were an alternative fuel.

The bill would also raise about $7 billion from a crackdown on international tax cheaters, an issue the Internal Revenue Service and the Obama administration have embraced.

Harry Reid, Democrat of Nevada and the Senate majority leader, said he hopes to pass the measure this week, despite a second major snowstorm in less than a week hitting the Washington area last night and today.

Senator Richard Burr, Republican of North Carolina, said he is unhappy that the bill would add to the budget deficit - the tax provisions and a few spending cuts would cover only about $50 billion of the $80 billion cost of the bill.

The powerful physicians’ lobby is behind a plan to prevent them from absorbing a 21 percent cut in Medicare payments, but that only wins relief through Sept. 30.

About $33 billion in popular tax breaks, including an income tax deduction for sales and property taxes and a business tax credit for research and development, would be extended through 2010.

The tax breaks, more than 40 in all, expired at the end of 2009.

The House voted to extend them in its more extensive jobs bill in December, but the Senate never addressed them because of the health care debate.

The tax breaks are important to a wide group of constituencies, including Midwestern producers of biodiesel fuel. When the $1-per-gallon tax credit expired at the start of the year, the retail price rose by $1 a gallon, making it less competitive with regular diesel fuel, said Michael Frohlich of the National Biodiesel Board.